The Luxury Letter Blog

The Luxury Market Stays Afloat in a Drowning Economy
July 29, 2008, 5:12 pm
Filed under: Uncategorized

Written by Hibben Silvo, editor

It’s not so much that we’re afraid of change, but more so of the unknown. There is a growing concern about how the luxury industry will be affected by the weak economy, leading to a vast unknown. Fortunately, it seems that the luxury market isn’t going anywhere; it’s simply changing and adjusting to the times. For example, fashion is shifting towards a more conservative style, private jets are marketing themselves as a tool, and people are seeking vacations that both entertain and educate.

The fashion industry is especially likely to remain relatively unchanged. Suze Yalof Schwartz, Glamour’s fashion editor at large was quoted in an msnbc article saying,“ of course, women will shop for clothes even in hard times, but they might choose one or two new-but-classic dresses instead of a closet full of trendier items.”

The luxury travel industry is also seeing little change. Those who want to travel and make it a priority in their lives save for it and set aside part of their budget towards it. James Currie, Conservation Corporation Africa’s public ambassador quoted to USA Today’s David Sharp that “certainly the economic events have affected travel. There’s no doubt about that. But it has not affected the luxury sector of the market as much as the middle-of-the-road market.”

Even real estate for the ultra wealthy seems to be staying afloat. Once someone has reached a certain tier of wealth they are no longer affected by fluctuating interest rates and can pay up front and in cash. Laurie Moore-Moore, founder of the Institute for Luxury Home Marketing in Dallas said in Businessweek that, “the top 5% of the market is strong not just because the rich in the U.S. are getting richer. Wealthy foreign buyers are also coming in to take advantage of the weak dollar and relatively bargain prices.”

For the most part, individuals who have become accustomed to a certain lifestyle are likely to want to maintain it. Suki Larson, chief executive of Keep, a luxury market consulting firm based in London, was quoted in the Atlanta Journal Constitution as saying, “individuals are still looking for the niceties in life, they have acquired a taste for luxury and aren’t giving it up.” Milton Pedraza, chief executive of the Luxury Institute was also quoted in the AJC reminding us that, “most of the wealthiest people are above the age of 50, and these people have been through recessions and downturns before, so they aren’t so bothered by them. Many are conservative and patient investors who know that things are cyclical.”

The point is that the affluent are always going to have the funds to afford the most high-end goods and amenities that the market has to offer. Their purchasing trends may vary but there will also always be adjustments on the part of the industry to accommodate these fluctuations. Whether it be adjusting their advertising and marketing strategies or changing their products to reflect the current trends, the luxury market has all the economic security money can buy.

However, as secure as the luxury market is, it’s unwise to take it for granted. What I have learned working at Adcision Luxury Media is that you have to move with the change. This can be done in many ways, but here are three I suggest:

• Try new channels and think outside the box when placing and targeting your advertising, those who are most receptive to change are the ones most likely to prosper when times get tough

• Test and optimize your campaigns, there’s no sense in continuing something that isn’t working, it’s only a waste of time and precious resources

• Consider sponsored E-mails, they’re efficient and targeted to a specific audience.

So instead of worrying about how the weakened economy will affect your business focus your energy in directions that will keep it relevant to the needs and outlook of the moment. Even Andy Warhol once stated, “they always say time changes things, but you actually have to change them yourself.” So be proactive, don’t look at it as a crisis but rather an opportunity for something new and possibly even better.

References for this article:

Even the Rich Feel Pinched, Await New Presidential Leadership, Marketing Daily
Is Luxury Becoming a Fashion Faux Pas?, msnbc
Study: Online Spending Unaffected By Slumping Economy, Online Media Daily
Luxury Travel Less Affected by Poor Economy, USA Today
Luxury Homes Buck the Trend, Businessweek